Correlation Between Western Digital and Plum Acquisition

Can any of the company-specific risk be diversified away by investing in both Western Digital and Plum Acquisition at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Western Digital and Plum Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Digital and Plum Acquisition Corp, you can compare the effects of market volatilities on Western Digital and Plum Acquisition and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Western Digital with a short position of Plum Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Plum Acquisition.

Diversification Opportunities for Western Digital and Plum Acquisition

0.12

Correlation Coefficient

Western Digital  Plum Acquisition

Average diversification

The 3 months correlation between Western and Plum is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Plum Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum Acquisition Corp and Western Digital is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Western Digital are associated (or correlated) with Plum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plum Acquisition Corp has no effect on the direction of Western Digital i.e., Western Digital and Plum Acquisition go up and down completely randomly.

Pair Corralation between Western Digital and Plum Acquisition

Considering the 90-day investment horizon Western Digital is expected to under-perform the Plum Acquisition. In addition to that, Western Digital is 10.44 times more volatile than Plum Acquisition Corp. It trades about -0.14 of its total potential returns per unit of risk. Plum Acquisition Corp is currently generating about -0.06 per unit of volatility. If you would invest  1,114  in Plum Acquisition Corp on September 22, 2024 and sell it today you would lose (4.00) from holding Plum Acquisition Corp or give up 0.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Western Digital  vs.  Plum Acquisition Corp

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Plum Acquisition Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady primary indicators, Plum Acquisition is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Western Digital and Plum Acquisition

The main advantage of trading using opposite Western Digital and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital position performs unexpectedly, Plum Acquisition can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Plum Acquisition will offset losses from the drop in Plum Acquisition's long position.

The idea behind Western Digital and Plum Acquisition Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.